CFP^® ; CIMA^®, CPWA^®, CIMC^®, and RMA℠ Eligible

Duration: 1 Hour

Option 1: Friday, March 19^th at 9:00am ET

Option 2: Wednesday, April 14^th at 3:00pm ET

This session will include participant Q&A.

Course Description

Public policy always impacts economies and financial markets. Such impacts are particularly pronounced now. The uncertainty surrounding a new government as well as trade, fiscal, geopolitical, and monetary policy is contributing to heightened market volatility.

Federal budgetary policy, termed fiscal policy, has been and will be a driving force. The pandemic cost the US 22 million jobs in March and April 2020. An expansionary fiscal policy, the multitrillion-dollar CARES act, lifted the economy but at the cost of a $3.1 trillion federal deficit. Earlier, the Tax Reform package was the major economic initiative of the Trump administration and Congress. We will analyze the economic and financial impacts of fiscal policies pre- and post-pandemic. The tax cuts likely contributed to the “Trump bump” in economic growth and the stock market during 2019. However, the tax cuts increased the Federal Government deficit, even before it exploded during the pandemic. We will discuss possible future scenarios. Deficits imply government borrowing, achieved by issuing more Treasury Securities. Thus, deficits add into a Gross Federal Debt that jumped to significantly over $27 trillion by autumn 2020. If the deficits increase as forecast over the next decade, will the US government debt become so large that people will not want to hold it? If so, bond prices would decline, market interest rates would rise, and the sustainability of the debt will become a crucial issue.

Further, government deficits can exacerbate trade deficits. This seems to be the case in the US in recent years, and probably during recent decades.  The deficits led President Trump to turn toward protectionist trade policy. Trump’s trade policies risked trade wars, especially with China, resulted in a “new NAFTA,” and added uncertainty to the financial outlook.  The world awaits more information on President Biden’s trade policies. The impact on business and markets of new trade policies will be analyzed.

The US faces many geopolitical risks and international “hot spots” of potential conflict; thus, policy towards national security will be crucial. Impacts are likely to be felt during 2021 and beyond in the economy, in business opportunities, in financial markets, and in the Biden approach to foreign policy.

The ultimate goal of this elective is to engage SII participants in an exploration of the U.S. fiscal, trade, political, and financial future.

Learning Objectives:

• Understand the evolution of fiscal policy in the US. Fiscal, also known as government tax and spending or budgetary policy, is a key determinant of the performance of the US economy and financial markets. Participants will develop and/or update their skills analyzing the theory and practice of fiscal policy. Real-world data and trends will enhance learning.
• The tax reform package is the major pre-pandemic piece of economic policy during the Trump administration. Fiscal stimulus then went into overdrive with the CARES act to stave off economic depression. The result was a fiscal deficit of over $3 trillion. Participants will gain an understanding of the aims and the preliminary impact of the tax package on the US economy and financial markets. Impacts can include the subsequent changes in economic growth, financial markets, interest rates, and exchange rates.
• International trade policy turned protectionist during the Trump administration. However, progress was then made on some fronts, such as modernizing NAFTA into the USMCA. We will analyze how trade policy may evolve now. Trade policy clearly impacts financial markets; however, the channels of impact and the magnitude of impact are subject to considerable debate.
• In our global and volatile world, public policies, such as those dealing with national security and potential international conflict, take on added importance. Analyzing the impacts of various government policies is the ultimate objective.